TaxTMI 
TaxTMI 
2009 (11) TMI 78
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....jection if the original grounds are substituted by the revised grounds. 3.1 In the light of the arguments advanced by the respective parties the original grounds are substituted by the revised grounds raised by the assessee in each of these appeals. 4. It was the submission of the learned Authorised Representative that in each of these appeals identical grounds have been raised and except for the differences in the amounts mentioned in ground No. 4 the grievance of the assessee and its arguments in regard to the grounds are identical since facts and circumstances are the same. Accordingly for ready reference we reproduce the grounds raised in ITA No. 549/Kol/2007 hereunder: "1. For that the CIT(A) was grossly unjustified in confirming the order of AO and the issues arising therefrom have not been truly and fully discussed in the order. 2. For that the notice under s. 148 of the Act is void ab initio and bad in law. 3. For that the assessment completed under s. 147/148 of the Act is without jurisdiction and bad in law. 4. For that the entire amount of Rs. 18 lacs, Rs. 21 lacs in asst. yr. 1994-95, Rs. 23 lacs in asst. yr. 1995-96, Rs. 24 lacs in asst. yrs. 1996-97 ....
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....nbsp; Cash Rs. 24,00,000 -------------------------------------- The said declaration under VDIS Scheme, 1997 was not accepted consequently no certificate was issued to the assessee in terms of the scheme by the designated authority the CIT, WB-IX, Kolkata as the assessee failed to pay tax within time. 6.1 In view of the above a notice under s. 148 was issued to the assessee. Considering the response of the assessee the AO made addition of Rs. 18,00,000 in asst. yr. 1993-94, Rs. 21,00,000 in 1994-95, Rs. 23,00,000 in asst. yr. 1995-96 and Rs. 24,00,000 in asst. yrs. 1996-97 and 1997-98. 6.2 Aggrieved by this the assessee went in appeal before the CIT(A). In appeal the CIT(A) however confirmed the said action of the AO. 6.3 It is seen that before the CIT(A) the assessee had challenged the action of the AO in passing the order under s. 147 of the Act. Arguments were also advanced assailing the assessment order relying upon the judgment of the Hon'ble apex Court in the case of Hemalatha Gargya vs. CIT (2003) 182 CTR (SC) 107 : (2003) 259 ITR 1 (SC) on the basis of which it was argued that if the declarant fails ....
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....her submitted by the learned Authorised Representative that the judgment of the Hon'ble Calcutta High Court in the case of CIT vs. Bhartia Steel Engineering Co. (P) Ltd. (1986) 51 CTR (Cal) 254 : (1986) 162 ITR 20 (Cal) also fully supports ground No. 2 of the assessee. Referring to the said judgment it was submitted that herein their Lordships had held that the Department cannot rely on voluntary disclosure letter of the assessee in which it had made admission that it had undisclosed income as such the Tribunal's order in favour of the assessee had been upheld. It was submitted that the reference made by the Tribunal at the instance of the Revenue was decided against the Department by the Hon'ble Calcutta High Court. 7.2 It was also submitted by the learned Authorised Representative that various orders of the Tribunal have considered identical issue and decided the issue in favour of the assessee as such the point at issue it was submitted is fully covered in favour of the assessee. For the said submission attention was invited to the order of the Co-ordinate Bench in the case of Smt. Kamini Hanskamal Grover vs. ITO (2005) 95 TTJ (Ahd) 363 copy of which is filed before the Bench....
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....d 3.1 of the impugned order. 8.1 It was also submitted that the bifurcation of the cash of Rs. 1.10 crores found at the residence of the assessee in different assessment years was given by the assessee himself in the declaration dt. 24th Dec., 1997 itself. Referring to para 3.2 of the impugned order it was elaborated by the learned Departmental Representative in support of the impugned order that the declaration under VDIS Scheme, 1997 was not accepted. As such no certificate thereon was issued by the learned CIT, WB-IX, Kolkata as the assessee failed to pay the tax as per the provisions of VDIS scheme, within the specified period i.e., upto 31st March, 1998. 8.2 These facts it was submitted by the learned Departmental Representative constitute sufficient information for the formation of belief of the AO on the basis of which he had reasons to believe that income has escaped assessment. Accordingly it was submitted that after recording reasons notice under s. 148 dt. 31st Aug., 1999 was duly served upon the assessee on 1st Sept., 1999. 8.3 Referring to the assessment order it was submitted that the reasons recorded have been brought to the notice of the assessee. For this ....
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....2 requesting the assessee to appear before the said authority with the following information: (1) Return of income for the asst. yrs. 1993-94 to 1997-98 in terms of notice under s. 148 issued and served on 1st Sept., 1999. (2) Books of account. (3) Bank statement/bank pass book. (4) Particulars and source regarding cash of Rs. 18,00,000 for the asst. yr. 1993-94, Rs. 21,00,000 for the asst. yr. 1994-95, Rs. 23,00,000 for the asst. yr. 1995-96, Rs. 24,00,000 for the asst. yr. 1996-97 and Rs. 24,00,000 for the asst. yr. 1997-98. (5) Any other details and documents relating to asst. yrs. 1993-94 to 1997-98 as per notices under s. 142(1) issued and served on 30th Jan., 2002. 8.6 Accordingly it was the submission of the learned Departmental Representative that the reasons recorded have been communicated to the assessee and again and again the AO has given the assessee opportunity to address the issue on merits and the said action of the AO is fully in compliance with the principle laid down by the Hon'ble apex Court in the case of GKN Driveshafts (India) Ltd. vs. ITO (2003) 179 CTR (SC) 11 : (2003) 259 ITR 19 (SC) as such it was his submission that any arguments qua gr....
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....unting to an admission that this amount was not disclosed in the return wherein the AO had made addition on account of wastage, which was held to be not proved as such added back by him, and; interest, which was disallowed by the AO for lack of proof, and; cash credit, bank deposits in the name of the directors of the company which was added by the AO for want of proof. Referring to the said judgment the learned Departmental Representative submitted that therein their Lordships of the Calcutta High Court were considering the s. 24 of the Finance (No. 2) Act, 1965. Sub-s. (11) of that section which provides as under [See (1965) 58 ITR (St) 10 and 11]: "(11) Notwithstanding anything contained hereinabove or in any other law for the time being in force, nothing contained in any declaration made under this section shall be admissible as evidence against the declarant for the purpose of any assessment proceeding or any proceeding relating to imposition of penalty or for the purpose of prosecution under any of the Acts mentioned in sub-s. (9) or the WT Act, 1957 (27 of 1957), in respect of any amount specified in an order made by the CIT under sub-s. (4) or, if such amount is altered ....
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....e of no help to the assessee since there is material difference in the facts taken into consideration by the Tribunal. Elaborating the issue inviting attention to the order of the Ahmedabad Bench in the case of Smt. Kamini Hanskamal Grover vs. ITO cited supra it was the submission of the learned Departmental Representative that the AO reopened the assessment for 1998-99 assessment year in which year there was no declaration made by the assessee. As such declaration made in some other year could not be considered to constitute reason to believe for reopening the assessment in some other year. 8.13 Similarly the order of the Tribunal in the case of Inder Kumar Bachani (HUF) it was submitted by the learned Departmental Representative was also of no help to the assessee in view of the fact that in the VDIS the disclosure pertains to some other assessment year and not the asst. yr. 1998-99 which was sought to be reopened. Accordingly, the facts, it was argued are entirely distinguishable from the present case. In the facts of the present case the learned Departmental Representative referring to the impugned order submitted that herein the information available with the AO is the decl....
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....The sufficiency or correctness of the material, it was submitted is not a thing to be considered at the stage of issuance of notice. Addressing the facts of the present case it was submitted that the assessee has been found to be in possession of Rs. 1.10 crores at his residence by the Enforcement Directorate. The assessee could not explain the sources of the same in the proceedings in the specific years of the specific amounts as per assessee's own bifurcation given in his declaration. This constitutes sufficient material for the AO to act and proceed. 8.16 Relying upon the judgment of the Hon'ble Patna High Court which had been taken into consideration by the CIT(A) in the case of Baldeo Prasad vs. CIT it was the submission of the learned Departmental Representative that the said issue fully covers the case at hand as therein also the disclosure petition under the VDIS scheme was not accepted. The addition confirmed by the Tribunal was upheld by the Hon'ble High Court and the reference moved before the Hon'ble High Court at the instance of the assessee was dismissed. 8.17 Reliance was also placed upon the Addl. CIT vs. Popular Jewellers (1984) 42 CTR (Del) 205 : (1984) 149 ....
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....en before the Tribunal it was submitted the assessee has not cared to address the issue. The CIT(A) it was submitted has specifically addressed the issue in para 3.13 of the impugned order and thus confirmed the action of the AO. Reliance was also placed on the judgment of the Hon'ble Delhi High Court in the case of Sukh Ram vs. Asstt. CIT (2006) 204 CTR (Del) 336 : (2006) 285 ITR 256 (Del) so as to contend that since the cash was found in the possession of the assessee the presumption that the assessee is the owner has been held by the Hon'ble High Court and the assessee in the present proceedings has lead no arguments or facts to disclose the source. 8.2Q Reliance was also placed on the Allahabad High Court in the case of Shyam Sunder Jalan vs. CIT (2002) 172 CTR (All) 67 : (2002) 254 ITR 596 (All) wherein it was held that if the disclosure made by the assessee is not total then there is no bar on the AO to apply the provisions of ss. 147 and 148 and make assessments of the actual escaped income. 8.21 Similarly if on the basis of declaration filed by the assessee under VDIS scheme if the AO found that despite the declaration made any income remains unassessed or underassess....
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....y the assessee in the present appeal that in order to adjudicate upon the issues agitated it is appropriate to formulate the issues agitated before us in the following manner: (i) the first and foremost issue which arises in the present appeal is whether the declaration dt. 24th Dec., 1997 made by the assessee in the peculiar facts and circumstances under VDIS, 1997 can be considerable information available to the AO to process under s. 147 of the IT Act; (ii) if the answer to the above question is in the affirmative then it falls for our consideration to decide whether the said information for the purpose of invoking ss. 147 and 148 of the Act can be considered to constitute the basis of the formation of the belief of the AO that the income has escaped assessment? 9.1 Accordingly in the light of the questions formulated by us we first and foremost propose to set out the accepted facts and thereafter proceed to examine the principles laid down in various judgments which have been referred for our consideration by the parties before us. The undisputed facts are: (i) that the assessee was subject to search by the Enforcement Directorate on 8th Nov., 1997; (ii) it is al....
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....dered to be information available with the AO. 9.3 It may not be out of place to mention here another undisputed fact that the assessee petitioned the Hon'ble Calcutta High Court that the FERA authorities may be directed to release 30 per cent of the amount of Rs. 1.10 crores seized by them to the assessee. However, the said petition of the assessee was not accepted by the Hon'ble High Court. It is also a matter of record that pursuant to the matter pending before the Hon'ble Calcutta High Court, the assessee requested the IT authorities to keep the proceedings in abeyance. However since the funds were not released by FERA despite petitioning the Hon'ble High Court the assessee in terms of the declaration made was unable to pay due tax in terms of the requirements of the scheme. 9.4 In the light of these above undisputed facts and arguments advanced on behalf of the assessee and the Department we now propose to examine the principles laid down by the apex Court in the case of Hemalatha Gargya vs. CIT cited supra. 9.4.1 A perusal of the said judgment shows that their Lordships therein were seized of the issue whether the time for payment fixed under ss. 66 and 67 of the VDI....
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....oned in s. 67(1) was extendable on the grounds of equity was also not accepted by their Lordships. 9.4.6 Their Lordships were very categoric in holding that the scheme has conferred a benefit on those who had not disclosed their income earlier by affording protection against the possible legal consequences of such non-disclosure under the IT Act. Thus where the assessees seek to claim the benefit under the statutory scheme, their Lordships held the assessees are bound to comply strictly with the conditions under which the benefit is granted. It was categorically held that there is no scope for the application of any equitable consideration when the statutory provisions of the scheme are stated in such plain language. Accordingly their Lordships clearly enunciated that the Courts have no power to act beyond the terms of the statutory scheme under which benefits have been granted to the assessee and extend the time on considerations of even equity. 9.4.7 Accordingly considering these arguments and the relevant provisions of the scheme their Lordships in the context of the said provisions namely s. 67 considered that wherever in terms of the declaration, the taxes were not paid ....
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.... available to the Department. As has been discussed in detail in the above paras a perusal of the said judgment clearly shows that their Lordships nowhere had an occasion to consider that the declaration could not be considered by the AO for the purposes of s. 147. Their Lordships merely held that the benefit of the scheme cannot be extended to the assessee who had not complied with the requirements of ss. 66 and 67 of VDIS, 1997. They held that the time fixed under the said scheme cannot be extended even under s. 119(2)(b) of the IT Act, 1961. The benefit to the assessees who had made the payment beyond the specified period for reasons beyond their control was denied even on the grounds of equity the rigour of law it was held could not be diluted. Thus in this background it was held that the benefit declared by those assessees who had not fully and strictly complied with the scheme cannot be extended to those assessees and the declaration filed therein for the purposes of the scheme shall be deemed never to have been made under the scheme. However, the Department was directed to refund or adjust the amounts already deposited by those assessees in purported compliance with the- pro....
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....al had held that this letter of disclosure did not contain any admission of concealment of income to sustain the order under s. 23A. 9.5.2 Their Lordships at p. 22 of the said judgment reproduced the specific declaration of the assessee namely "that the above of Rs. 16,56,600 is the income from our business undisclosed upto 31st March, 1964, i.e., the asst. yr. 1964-65" and that it does amount to an admission that this amount was not disclosed in the returns filed by the assessee company for the assessment years up to the year 1964-65. Accordingly, the Lordships held that on this aspect we cannot uphold the view of the Tribunal. However, taking into consideration the sub-s. (11) of s. 24 which reads as under: "(11) Notwithstanding anything contained hereinabove or in any other law for the time being in force, nothing contained in any declaration made under this section shall be admissible as evidence against the declarant for the purpose of any assessment proceeding or any proceeding relating to imposition of penalty or for the purpose of prosecution under any of the Acts mentioned in sub-s. (9) or the WT Act, 1957 (27 of 1957), in respect of any amount specified in an order ....
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....ssessment proceedings as herein immunity is granted only to penalty and prosecution proceedings what is equally important is that the assessee since did not comply with the requirements of VDIS, 1997 and received no certificate from the designated authority the occasion to consider his case on a better footing than that of a declarant whose declaration is accepted would be a force of justice. Since admittedly what a successful declarant could not claim a declarant who did not succeed cannot be put in a better position. The ratio laid down by the apex Court in the Hemalatha Gargya does not help the assessee in any manner especially once the wordings of the specific schemes which are under consideration given a co-joint reading. 9.5.8 For ready reference we reproduce again the relevant provisions of the respective schemes namely s. (11) of s. 24 taken into consideration by the jurisdictional High Court in Bhartia Steel which reads as under: "(11) Notwithstanding anything contained hereinabove or in any other law for the time being in force, nothing contained in any declaration made under this section shall be admissible as evidence against the declarant for the purpose of any a....
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....nal High Court in the case of Bhartia Steel Engineering Co. (P) Ltd. discussed earlier. Thus the judgments of the Hon'ble Patna High Court it is seen has correctly been applied by the CIT(A). 9.7 Before us reliance has also been placed on the judgment of the Hon'ble Delhi High Court in the case of Addl. CIT vs. Popular Jewellers cited supra by the Revenue. A perusal of the said judgment shows that considering the declaration made by the wives of five partners of the assessee firm consisting of seven partners their Lordships reversed the order of the Tribunal holding that there was no material on record to show that the sum of Rs. 50,000 was the income of the firm. As such as there was no fact or circumstances to show how the wives of only five partners could be held to be benami for all the seven partners of the firm. The matter as such was remanded to the Tribunal to see the effect of the answer to the question whether the sum of Rs. 50,000 is to be treated as the undisclosed income for the asst. yr. 1967-68 and whether the interest amounts are to be treated as allowable deductions for the asst. yrs. 1967-68, 1968-69 and 1969-70. However what is relevant for the purposes of the....
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....onstitute information available with the AO to proceed under s. 147 of the Act. 9.7.2 As has been discussed at great length in the earlier parts of this order it is seen that the specific VDIS Scheme, 1997 does not grant immunity to the declarant from assessment proceedings and does so only from the penalty and prosecution proceedings. Further we have also examined the judgments of the apex Court and jurisdictional High Court at great length namely Hemalatha Gargya and Bhartia Steel. A consideration of the judgment of the Delhi High Court and Patna High Court namely, Popular Jewellers and Baldeo Prasad further justify our view. Thus the first issue formulated by us is answered in the affirmative. 9.7.3 Coming to the next issue namely can the said information constitute the basis of the formation of the belief of the AO that income has escaped assessment. It is seen that the Courts are unanimous in holding that the formation of the belief within the realm of the subjective satisfaction of the AO. The order passed is a speaking order setting out clearly the reasons for the action taken. Accordingly considering the following judgments which we would briefly refer to, we decide t....
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....on to reopen the specific years. The bifurcation of the said amount namely Rs. 1.10 crores has been done in the five assessment years by the assessee himself as such orders of the Tribunal relied upon by the assessee are of no help. The declaration on facts considering the position of law has been considered an admissible piece of evidence for the purposes of information available with the AO which led to the formation of the belief that income has escaped assessment. 9.7.9 For arriving at the conclusion we would also like to refer to the following judgments of the different High Courts relied upon before us namely: (i) Avtar Singh Sandhu vs. WTO; (ii) Chuharmal vs. CIT; (iii) Sukh Ram vs. Asstt. CIT; (iv) Shyam Sunder Jalan vs. CIT. A perusal of the principles laid down therein also fortifies the view taken. Accordingly ground Nos. 2 and 3 raised by the assessee for the detailed reasons given hereinabove are dismissed. 10. The next ground agitated by the assessee in the sequence of arguments is ground No. 1. On a perusal of the material available on record which has been discussed at length we do not find any merit in the ground raised by the assessee. It is s....